Credit Suisse Pays & Gets Away

Sucheta Dalal 27 May 2014

Banks get away easily under RBI too

The United Sates of America (USA) has extracted yet another whopping financial settlement from Credit Suisse for allowing it to continue doing business in that country. Credit Suisse will pay a fine of $2.6 billion and has agreed to a guilty plea to the criminal charge of helping Americans to evade tax.

This follows publication of a summary of enforcement proceedings by Swiss Financial Market Supervisory Authority (FINMA) against Credit Suisse in 2011 and 2012 which found wrongdoing in cross-border transactions involving Americans.

The Credit Suisse settlement follows a string of guilty pleas by high-profile banks. In December 2012, HSBC Holdings paid $1.92 billion after admitting to charges of flouting money-laundering rules to prevent transactions with countries facing US sanctions. One must also recall that the famed JP Morgan Chase had paid $2.5 billion in fines to the government and to victims of Bernie Madoff’s ponzi schemes which it failed to monitor.

It is a matter of grave concern that large US banks and financial institutions get away with guilty pleas that involve massive settlements with little action against those responsible for institutionalising and rewarding illegal and pernicious business practices. Indian regulators who look westward when it comes to financial sector regulation, however, fail to act with the same forcefulness when it comes to imposing hefty fines or ensuring compensation of victims. The banking regulator—the Reserve Bank of India (RBI)—is dragging its feet over a consumer protection framework.

Worse, it also ignores the need for class action even when there is a clear pattern to consumer complaints which show deliberate churning, and mis-selling of financial products (insurance, mutual funds, art funds, etc) to extract higher fees and commissions. This usually happens under wealth management services, making it a case of breach of trust as well. The irony is that RBI fails to understand that its goal of financial inclusion will be set back if banks extend their dubious practices to the unbanked masses when they are newly inducted into the banking system.

Comments

User

S.S.A.Zaidi

1 decade ago

There seems to be a set patterrn--violate the AML guidelines /Sanctions ,pay the fine ,whatever may be the amount of penalty that will still be a fraction of the huge profits these instituitions make,and Regulatory authorities also happy with the huge amount they get as penalties-
zaidi